Financial Times

US to impose tariffs on $200bn of Chinese imports

by Sam Fleming, Joe Rennison and Lucy Hornby

July 11, 2018 | 5:44 pm
  |     |     |   Start Conversation
US to impose tariffs on $200bn of Chinese imports

Donald Trump kicked off the process of imposing tariffs on a further $200bn of imports from China, in a significant escalation of the trade war between the two economic powers and one that directly challenges US corporations.

The new list of tariffs takes aim at multinationals reliant on sourcing from China for materials and components including automotive parts, food ingredients and construction. If implemented, they would have a bigger impact on US consumers than the tariffs imposed last week on $34bn of goods, which focused on manufacturing components.

The president has told the US trade representative Robert Lighthizer to begin preparations for levies of 10 per cent, the administration said, as it set forth a list of products that may be targeted.

The announcement triggered declines in financial markets as traders reacted to the worsening relations between the two nations and prompted criticism from senior figures within the president’s own party.

China-focused stocks led a broad sell-off in Asia-Pacific equities and the renminbi slid in response to the tariffs.

The Trump administration’s move comes after Beijing accused the US of “trade bullying” and slapped tariffs on $34bn of American exports. China’s action last week came “without any international legal basis or justification”, Mr Lighthizer said on Tuesday evening.

“For more than a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” he said.

“We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behaviour — behaviour that puts the future of the US economy at risk.”

USTR will now begin a public notice and comment process running through July and August, before the imposition of the final tariffs. Mr Trump has told journalists he was ultimately willing to impose tariffs on all $500bn of the goods imported from China.

Beijing has retaliated to the measures imposed to date by targeting US farm and energy exports, including soyabeans. The Ministry of Commerce said on Wednesday that China was “shocked” by Washington’s moves. The actions “were hurting China, hurting the entire world and hurting the US itself”, the ministry said, noting that the “irrational action was unpopular”.

US officials have insisted the country was well positioned economically to handle the trade war. Recent jobs numbers have remained robust, with the US adding 213,000 positions in June. The Trump administration had previously attempted to avoid directly affecting consumers with its tariffs on China but the scope is now widening.

The Chinese products that are on the US list range from certain kinds of furniture and luggage, to inflatable vessels, bicycle parts and burglar alarms.

David French, senior vice-president for government relations from the National Retail Federation, said the measures would “boomerang back” to harm US families and workers.

“Tariffs on such a broad scope of products make it inconceivable that American consumers will dodge this tax increase as prices of everyday products will be forced to rise. And the retaliation that will follow will destroy thousands of US jobs and hurt farmers, local businesses and entire communities.”

Alarm about the worsening trade situation has been spreading among major employers. Minutes from the Federal Reserve’s June meeting reported that businesses were saying that tariffs had already caused companies to put some investments on hold or reduce them.

Seventy of the top 100 exporters from China are foreign companies, putting them squarely in the crossfire, said Zhu Haibin, chief China economist at JPMorgan. “There will be a lot of collateral damage to US companies and other foreign companies. The impact, including to the US itself, will be much larger than Trump estimates.”

The president’s latest move was criticised by Orrin Hatch, the Republican senator who chairs the powerful finance committee. “Although I have supported the administration’s targeted efforts to combat China’s technology transfer regime, tonight’s announcement appears reckless and is not a targeted approach,” he said.

“We cannot turn a blind eye to China’s mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy.”

In an unusually strident warning, Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, said that despite the rising economic risks there were no serious trade discussions going on between China and the US and no plans for talks soon. He urged Mr Trump to meet directly with Xi Jinping, Chinese president, to hammer out a solution.

Mr Brady said: “With this announcement, it’s clear the escalating trade dispute with China will go one of two ways — a long, multiyear trade war between the two largest economies in the world that engulfs more and more of the globe, or a deliberate decision by President Trump and President Xi to meet and begin crafting an agreement that levels the playing field between China and the US for local farmers, workers and businesses.”

The Trump administration move came after stock markets had found a foothold this week. Major US indices slipped by less than 1 per cent after the announcement.

“Markets have been treating trade wars as though they are a trade tiff,” said Peter Tchir, head of macro strategy at Academy Securities. “But I think this is bigger. Trump is very committed to it and I think markets are underestimating that. Investors are being too complacent.”

“I think volatility is now going to increase,” said Mr Tchir. “We are going to have to start picking the winners and losers from trade wars.”

Tags:

by Sam Fleming, Joe Rennison and Lucy Hornby

July 11, 2018 | 5:44 pm
  |     |     |   Start Conversation

Big Read |  

Analysis

What Nigeria must do before signing AfCFTA

Nigeria’s President Muhammadu Buhari last Wednesday gave a hint that he would sign the African Continental Free Trade Area (AfCFTA)...


Top 100 (300 x250)

MTN Felele

WSE

Newsletter Fixed income